NASDAQ 33 rd Investor Program Jan Siegmund ADP Chief Financial Officer

Transcription

1 NASDAQ 33 rd Investor Program Jan Siegmund ADP Chief Financial Officer 01 December 2015 Copyright 2015 ADP, LLC

2 Forward Looking Statements This presentation and other written or oral statements made from time to time by ADP may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Statements that are not historical in nature and which may be identified by the use of words like expects, assumes, projects, anticipates, estimates, we believe, could and other words of similar meaning, are forward-looking statements. These statements are based on management s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include: ADP's success in obtaining, retaining and selling additional services to clients; the pricing of products and services; changes in, or interpretations of, existing legislation or regulations, or compliance with new legislation or regulations; overall market, political and economic conditions, including interest rate and foreign currency trends; competitive conditions; our ability to maintain our current credit rating and the impact on our funding costs and profitability; vulnerability to security breaches, fraudulent acts, and system interruptions and failures; employment and wage levels; changes in technology; availability of skilled technical associates; and the impact of new acquisitions and divestitures. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. These risks and uncertainties, along with the risk factors discussed under Item 1A. - Risk Factors in our Annual Report on Form 10-K for the fiscal year ended June 30, 2015 should be considered in evaluating any forward-looking statements contained herein. Copyright 2015 ADP, LLC

3 About ADP One of the world s largest providers of HCM solutions Payroll Services Benefits Administration Recruiting and Talent Management Human Resources Management Time and Attendance Management Insurance Services Retirement Services Payment and Compliance Solutions ADP pays 24 million (1 in 6) workers in U.S. and 12 million outside the U.S. 630,000 clients in more than 100 countries Includes 440,000 small businesses Over 80% of Fortune 500 companies Over 90 Fortune 100 companies 55,000 associates worldwide in 40 countries Manage 7,000+ global tax agency relationships Moved approximately $1.7 trillion in U.S. client funds in FY 2015 Committed to AA/Aa ratings category 41 years of consecutive dividend increases $10.9 billion in revenue in FY

4 Historic Performance: Business Fundamentals are Solid FY13 FY14 FY15 Total Shareholder Return Revenue Growth 6% 8% 7% Pretax Margin 18.5% 18.4% 18.9% Pretax Margin Growth 1.0% 0.1% 0.5% Impact from Client Funds 1.3% 0.9% 0.2% Share Repurchases $0.6B $0.7B $1.6B 3 Year 5 Year 23.7% 21.7% Diluted EPS $2.39* $2.58 $2.89 EPS Growth 2% 8% 12% Dividends $0.8B $0.9B $0.9B 10 Year 13.2% * Fiscal 2013 diluted earnings per share was adjusted to exclude a non-tax deductible $43 million ($0.09 per share) non-cash goodwill impairment charge recorded in the fourth quarter of fiscal Fiscal 2012 diluted earnings per share excludes a $66 million pretax gain on a sale of assets relating to a third-party expense management platform ($41 million after tax, $0.08 per share) recorded in the second quarter of fiscal

5 We are ALL IN on HCM We focus on our clients biggest investment, challenge and opportunity their people. Technology Service Innovation From Recruitment Support Compliance Insights To Retirement 5

6 All IN on HCM: Business Model remains attractive across all aspects Robust Revenue and Earnings Model Large, recurring revenue base spanning all HCM business segments Strong organic growth prospects from global operations Consistent earnings with sustainable ongoing operating margin improvement Strong Cash Flow Strong consistent operating cash flow generation Low capital requirements; disciplined approach to acquisitions Efficient model allows reinvestment in the business for organic growth 41 years of consecutive dividend increases Longstanding commitment to shareholder friendly actions Solid Balance Sheet Strong balance sheet and highest credit ratings within HCM industry Recently issued $2 billion in debt to fund 25 million share repurchase Commitment to the AA/Aa ratings category with multiple layers of liquidity 6

7 Our Strategic Pillars Grow a complete suite of cloud-based HCM solutions Invest to grow & scale our market leading HRBPO solutions by leveraging our platforms & processes Leverage our global presence to offer clients HCM solutions where they do business Simplify Platforms Seamless Process Innovate Product Client Experience Distribution Grow Clients Associates Financials 7

8 Leveraging HCM ecosystem: Strategic Pillars for growth Revenue dollar growth contributors over the longer-term 7-9% Annual Revenue Growth Longer Term $10.9B Fiscal 2015 Revenue About 40% Grow a complete suite of cloud-based HCM solutions About 40% Invest to grow & scale our market leading HRBPO solutions by leveraging our platforms & processes About 20% Leverage our global presence to offer clients HCM solutions where they do business 8

9 Forward ADP is the Looking market leader Statements among many diversified competitors Global Presence Single country Range of Client Sizes 104 countries Most complete HCM suite of products and services Single Employer Size focus Product Breadth Solution for all employer sizes Broadest market coverage, both geographic and client segments Best-of-breed (e.g., Talent Management only) Delivery Methods Supported Fully Integrated HCM 9 Copyright 2015 ADP, LLC. Software only Software + Service Software + Service + HRBPO

10 HCM Market is large and growing, and we are gaining share Global HCM, $ 2014, $ CAGR, ~ $110B U.S. HCM, clients 2014, clients CAGR, ~ 6M Market +6% Market +2% ~ $10B ADP +7% ~ 0.6M ADP +~5% Sources: IDC, Nelson-Hall, Gartner, Everest, Bersin, Cerulli and Associates, Census Bureau, BLS, ADP National Employment Report, competitor filings, ADP internal data and analysis 10

11 Gaining Momentum with: Our HCM Portfolio HCM Small Market HCM Mid-Market HCM Large Market HCM Global Market Clients / >440,000 Clients / >60,000 Clients / >200 Employees served / >12M Average client size / ~10 employees Average client size / ~200 employees Average client size / ~4k employees Countries served / 104 RUN powered by ADP SM ADP Workforce Now ADP Vantage HCM SM ADP Multinational Solutions Optional Comprehensive HRBPO Services 11 11

12 Clients are Responding Number of Clients in the Cloud Number of Mobile Users New Business Bookings 500K 5M 10% (3 Year CAGR) 2012 FY 2015 X 2012 FY FY

13 ADP Differentiation: Global Solutions GLOBAL COVERAGE HR / PAYROLL / BENEFITS TALENT GLOBAL EXPERTISE 104 Countries 20+ Languages TIME & LABOR MONEY MOVEMENT 13 Proprietary and Confidential.

14 Expanding to serve clients where they do business ADP s global footprint delivers service in 104 countries, covering 99% of multinational employees Toronto Halifax Prague El Paso Alpharetta Paris Shanghai Barcelona Bucharest Hyderabad Service Centers Countries Covered: 104 Countries Planned FY16: 9 Miami Sao Paulo Manila Singapore Melbourne 14

15 ADP Differentiation: Compliance & Regulatory Complexities 35% of mid-size businesses had unintended noncompliance fees 72% of large companies outsource payroll for tax compliance 90%+ of small / mid-size businesses rely on professional advisors for compliance <20% of mid / large-size companies are extremely prepared to manage the complexities of the U.S. Affordable Care Act (ACA) 1900 COMMON LAW NLRA COMMON LAW Burden of Increasing Regulations LMRA FLS IRS FICA NLRA COMMON LAW ADEA FUTA EPA EEO LMRA FLS IRS FICA NLRA COMMON LAW HIPAA FMLA ADA WARN EPPA IRCA COBRA ERISA HMO MSHA OSHA ADEA FUTA EPA EEO LMRA FLS IRS FICA NLRA COMMON LAW TODAY TAX RELIEF ACT ACA HIRE CHIPRA ARRA E E EO19494 FMLA REGS ADAA LEDBETTER HIPAA FMLA ADA WARN EPPA IRCA COBRA ERISA HMO MSHA OSHA ADEA FUTA EPA EEO LMRA FLS IRS FICA NLRA COMMON LAW IMMIGRATION REFORM MFJPA WFFA ICPCA AFA DACA ENDA TAX RELIEF ACT ACA HIRE CHIPRA ARRA E E EO19494 FMLA REGS ADAA LEDBETTER HIPAA FMLA ADA WARN EPPA IRCA COBRA ERISA HMO MSHA OSHA ADEA FUTA EPA EEO LMRA FLS IRS FICA NLRA COMMON LAW 15

16 Expanding our compliance knowledge base 16

17 ADP Differentiation: Big Data and Analytics 17

18 ADP TotalSource : A Compelling Value for our Professional Employer Organization (PEO) Clients Strategic HR partnership and expertise Administrative relief and economies of scale TotalSource Value Proposition Risk mitigation and compliance support Fortune 500 -caliber benefits program Industry-leading tools and technology 18

19 Financial Overview & Capital Allocation Copyright 2015 ADP, LLC

20 Priorities for use of cash and management of the balance sheet Cash Balance Sheet 1 Reinvest in the business to drive organic revenue growth and margin improvement 1 Benefits of and commitment to an extraordinarily strong credit rating unchanged 2 3 Invest in tuck-in acquisitions to supplement ADP s existing capabilities Return cash to shareholders via an increasing quarterly dividend + 41 Year track record of increasing dividends + Target dividend payout ratio 55-60%, subject to Board approval 2 3 Use of $2 billion of debt proceeds + Debt issuance proceeds to be used for 25 million share repurchase to be completed within 12 to 24 months, subject to market conditions Committed to AA/Aa ratings category 4 Return excess cash to shareholders via share repurchases + At least offset employee benefit plan dilution + Additional repurchases used to return excess cash to shareholders 20

21 Sustaining success: Longer-term revenue growth drivers + 6-7% Net New Business Contribution $10.9B - 7-8% + 1-2% Combined Contribution ~ + 0.5% ~ + 0.5% ~ + 0.5% 7-9% Annual Revenue Growth Longer Term Fiscal 2015 Revenue % Contribution from New Business Bookings Reduction from Client Losses Contribution from Pays-Per-Control Contribution from Client Funds Interest Revenue Contribution from Price Realization 21

22 What to expect for the future TSR Components Longer Term Expectation Revenue Growth 7-9% Margin Expansion (50-75 bps) ~4% Pretax Earnings 11-13% Net Share Reduction* ~1% EPS 12-14% Dividend Yield 2-3% Total Shareholder Return Objective Top Quartile of S&P 500 * Net Share Reduction does not incorporate recent debt issuance and corresponding 25 million share repurchase that is expected to be completed over the next 12 to 24 months. 22